Humana is challenging a CMS rule that would implement stricter auditing standards on Medicare Advantage plans.
The country's second-largest MA insurer filed the lawsuit in the U.S District Court in the Northern District of Texas Sept. 1. In the court filing, Humana asked the judge to require CMS to vacate the final rule, as it will have "unpredictable consequences for Medicare Advantage organizations and the millions of seniors who rely on the Medicare Advantage program for their healthcare."
In January, CMS said it would strike the fee-for-service adjuster from risk adjustment data validation audits, a tool that calculates a permissible level of payment errors and limits audit recoveries to payment errors above that level. The final rule will apply to contracts from 2018 and beyond.
CMS estimated it could recover $4.7 billion in overpayments to MA plans in the next decade with the new audit methodology. Nearly every major insurance company has previously been accused of or settled allegations of Medicare Advantage fraud, which the industry disputes.
In the Sept. 1 court filing, Humana alleged the new audit methodology violates the Administrative Procedure Act.
"The agency did not even try to offer an empirical or actuarial justification for its new audit methodology, relying instead on purely legal rationales — none of which withstand scrutiny," the company said in court documents.
The broader health insurance industry opposed the final rule, which CMS first proposed in 2018. Payers, including Humana, indicated they were likely to take legal action if the rule did not include a fee-for-service adjuster.
In February, Humana CEO Bruce Broussard said the company was "disappointed" that CMS eliminated the fee-for-service adjuster from MA audits.
In January, Bloomberg reported Humana may have the largest risk from clawbacks of major insurers, with as much as 17 percent of its 2023 earnings facing scrutiny, before interest, taxes, depreciation and amortization — or $900 million. As of June 30, Humana had nearly 5.8 million Medicare Advantage members, with plans to add around 825,000 more before the end of this year.
A CMS spokesperson said the agency does not comment on pending litigation.